A $26 Billion Hole

One item – that comes with a $26 billion price tag – in the Senate budget is getting plenty of attention. In fact, the rhetoric – from the State Employees Association and the Teachers Union and liberal groups – has gotten so heated one spokesman went so far as to suggest that, if this reform stays in the budget, we may never be able to hire another state employee.

Here’s what the ruckus is all about: Currently, state employees receive first class health insurance. And they receive two additional health insurance benefits: First, after working 20 years, and after reaching age 50, a state employee may retire and the state will continue to pay for their health insurance.

Second, if the same employee decides to go to a new job, the state will still continue to pay for his or her health insurance – instead of their new employer.

Those are the provisions the Senate proposes to change – for people who will be hired to work for the state after Jan 1, 2016.

What this means is straightforward: As long as a new employee works for the state he or she will receive the same first class health care benefits as every other state employee. However, if he or she changes jobs (after working 20 years and after reaching age 50) the state will no longer pay for their health insurance. Their new employer will have to do that. Or, if they decide to retire early, they will have to pay for their health insurance themselves.

There’s one other argument in favor of this change.

For years, the state has made commitments to pay employees and teachers pensions. And each year, the state has set aside funds to pay those pensions. As a result, the state’s pension plan is well funded and rests on a solid financial foundation.

However, state health insurance benefits are different. The state has never set aside a penny to pay for these benefits and, as a result, the state now has an unfunded liability of $26 billion.

We’ve dug ourselves a financial hole. Should we keep on digging or start climbing out?

The Senate’s proposal is fair to both employees and taxpayers. And – with a $26 billion unfunded liability – it’s the right thing to do.

Leave a Reply